The government may postpone the introduction of Merchant Discount Rate (MDR) charges on certain Unified Payments Interface (UPI) transactions beyond the scheduled October 15, 2026 start, according to a regulatory official and an industry executive familiar with the matter. The possible delay is being considered to avoid disruption during the festive shopping season and give payment companies more time to prepare their systems.
The proposed MDR would apply a 0.4% charge to Person-to-Merchant UPI transactions above Rs 2,000. The government has said consumers will continue to use UPI free of charge, while person-to-person payments will remain outside the proposed charge. Small-value merchant transactions of up to Rs 2,000 would also remain exempt.
The October 15 start date falls at the beginning of India’s annual festive period, which generally runs from October through December and is associated with higher consumer spending. Sources cited in the report said postponing the rollout could help prevent payment disruptions at a time when digital transactions typically rise and allow payment companies additional time to update their systems.
The possible postponement follows the government’s decision last month to end the zero-fee framework for some UPI transactions. The National Payments Corporation of India notified the 0.4% MDR for eligible Person-to-Merchant payments in September. For transactions of Rs 75,000 or more, the charge would be capped at Rs 300 per transaction.
The exemption for small payments is significant for everyday users and merchants. Transactions of up to Rs 2,000 account for more than 95% of the total volume of UPI Person-to-Merchant transactions, according to the report. This includes a wide range of routine purchases, from small retail payments to roadside transactions, while larger merchant payments would fall within the new MDR framework.
The charge is paid by the merchant’s acquiring bank or payment intermediary and is generally calculated as a percentage of the transaction value. The government has said the proposed system is intended to preserve UPI’s accessibility for everyday payments while supporting the long-term sustainability of the payments ecosystem.
The move has also become important for digital payments companies, which investors had expected to benefit from a share of the MDR proceeds. Shares of Paytm fell 7.6% and One Mobikwik Systems declined 7.2% on Thursday after reports of a possible delay emerged.
RBI Governor Sanjay Malhotra said on Wednesday that introducing a small fee was unlikely to have a major effect on UPI transaction volumes. He said the central bank had not seen a decline in volumes and did not personally expect a small MDR to significantly affect usage.
The legal framework for imposing MDR was created through an amendment to Section 10A of the Payment and Settlement Systems Act, 2007. Parliament approved the amendment during the Monsoon Session in August. A gazette notification issued on September 14 barred banks and system providers from charging individuals directly or indirectly for UPI transactions of up to Rs 2,000 and for RuPay debit-card payments.
The government has not formally confirmed a revised rollout date. The October 15 implementation schedule and the possible postponement remain subject to the final decision by the authorities overseeing the UPI payment framework.
